Thursday, October 8, 2009


Life insurance is not an insurance protection that one would not die. Insurance object of life is to insure against the loss of future income which may arise due to the early or premature death of the bread-winner or income producer. There are other needs to which the life insurance can be adapted, and this account for the various kinds of life insurance policies.
There are three main kinds of life insurance and many varieties in each kind. The mains are: Term insurance, Whole Life Insurance, and Endowment insurance.

A. Term Insurance:
Term insurance contract is an insurance for a specified period in which the insurer in return for a premium undertake to pay the sum assured to the beneficiary only in the event of death of the person on whose life the policy is based. That is to say, the sum assured would be paid only if the life assured dies before the stipulated time period usually for only twelve months. If he survives the fixed period no payment is made to him or his beneficiaries.
Term insurance is the type normally used in the mortgage protection insurance; for persons embarking on hazardous journey say astronauts; and by a creditor on the life of these debtors until the dept has been paid. It has varieties such as Decreasing term insurance, convertible term insurance, and family income benefits term insurance.

B. Whole Life Insurance:
This type of life insurance used to be the popular life insurance. It is an insurance devised to provide financial support for the family or the beneficiaries of an assured when he/she dies. The premium payment is paid periodical until he dies or up to a certain age say at the age of 55 or 60. A single premium can be paid at the inception of the contract, i.e. a lump sum premium payment.
Whole life insurance would always pay the sum assured if the contract terms were kept. The only unknown is when the sum will be paid as when the life assured shall die is uncertain.

C. Endowment Insurance:
Endowment insurance is the most popular type of life insurance in Nigeria. It is an insurance contract which provides to pay the sum assured if the life assured reaches a certain specified age or when he dies, whichever occurs first. The certain specified age is termed 'maturity date'; and the sum assured payable that date is known as maturity claims" if death comes first, the assured beneficiaries or his assignees. There are many adaptations of Endowment Life insurance as it provides saving for a given purpose, offers protection for beneficiaries in the event of the premature death of the breadwinner, avails financial protection against retirement; provides income for children's education and so on. The endowment insurance can be varied for group schemes, that is, providing life insurance for group of employees or class of person in a given organization and / or modified to provide pensions for retire insured persons.

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